Supply Side Economics Quotes

What's better- supply side economics a la John Keynes, or libertarian free markets a la Milton Friedman? Safety nets or bootstraps to build a just society? Big sticks or carrots to preserve international order? Federal or states' rights to guide the governed? Investing in education or employment to empower a citizenry? Seperation or integration of church and state? Multicultural melting pot or national identity? Revolution or evolution? The only honest answer is "it depends." and we're not entirely sure.

To those who feared oppressive taxes, Hamilton made an argument that anticipated “supply-side economics” of the late twentieth century, saying that officials “can have no temptation to abuse this power, because the motive of revenue will check its own extremes. Experience has shown that moderate duties are more productive than high ones.”10

Any system that penalizes success and accomplishment is wrong. Any system that discourages work, discourages productivity, discourages economic progress, is wrong. If, on the other hand, you reduce tax rates and allow people to spend or save more of what they earn, they’ll be more industrious; they’ll have more incentive to work hard, and money they earn will add fuel to the great economic machine that energizes our national progress. The result: more prosperity for all—and more revenue for government. A few economists call this principle supply-side economics. I just call it common sense.

There have been ample opportunities since 1945 to show that material superiority in war is not enough if the will to fight is lacking. In Algeria, Vietnam and Afghanistan the balance of economic and military strength lay overwhelmingly on the side of France, the United States, and the Soviet Union, but the will to win was slowly eroded. Troops became demoralised and brutalised. Even a political solution was abandoned. In all three cases the greater power withdrew. The Second World War was an altogether different conflict, but the will to win was every bit as important - indeed it was more so. The contest was popularly perceived to be about issues of life and death of whole communities rather than for their fighting forces alone. They were issues, wrote one American observer in 1939, 'worth dying for'. If, he continued, 'the will-to-destruction triumphs, our resolution to preserve civilisation must become more implacable...our courage must mount'. Words like 'will' and 'courage' are difficult for historians to use as instruments of cold analysis. They cannot be quantified; they are elusive of definition; they are products of a moral language that is regarded sceptically today, even tainted by its association with fascist rhetoric. German and Japanese leaders believed that the spiritual strength of their soldiers and workers in some indefinable way compensate for their technical inferiority. When asked after the war why Japan lost, one senior naval officer replied that the Japanese 'were short on spirit, the military spirit was weak...' and put this explanation ahead of any material cause. Within Germany, belief that spiritual strength or willpower was worth more than generous supplies of weapons was not confined to Hitler by any means, though it was certainly a central element in the way he looked at the world. The irony was that Hitler's ambition to impose his will on others did perhaps more than anything to ensure that his enemies' will to win burned brighter still. The Allies were united by nothing so much as a fundamental desire to smash Hitlerism and Japanese militarism and to use any weapon to achieve it. The primal drive for victory at all costs nourished Allied fighting power and assuaged the thirst for vengeance. They fought not only because the sum of their resources added up to victory, but because they wanted to win and were certain that their cause was just. The Allies won the Second World War because they turned their economic strength into effective fighting power, and turned the moral energies of their people into an effective will to win. The mobilisation of national resources in this broad sense never worked perfectly, but worked well enough to prevail. Materially rich, but divided, demoralised, and poorly led, the Allied coalition would have lost the war, however exaggerated Axis ambitions, however flawed their moral outlook. The war made exceptional demands on the Allied peoples. Half a century later the level of cruelty, destruction and sacrifice that it engendered is hard to comprehend, let alone recapture. Fifty years of security and prosperity have opened up a gulf between our own age and the age of crisis and violence that propelled the world into war. Though from today's perspective Allied victory might seem somehow inevitable, the conflict was poised on a knife-edge in the middle years of the war. This period must surely rank as the most significant turning point in the history of the modern age.

As Reagan’s first budget director, Stockman, a former two-term congressman from Michigan, was the point man for the supply-side economics the new administration was pushing— the theory that taxes should be lowered to stimulate economic activity, which would in turn produce more tax revenue to compensate for the lower rates. With his wonky whiz-kid persona, computer-like mental powers, and combative style, he browbeat Democratic congressmen and senators who challenged his views. But he soon incurred the wrath of political conservatives when he confessed to Atlantic reporter William Greider that supply-side economics was really window dressing for reducing the rates on high incomes. Among other acts of apostasy, he called doctrinaire supply-siders “naive.” The 1981 article created a sensation and prompted Reagan to ask him over lunch, “You have hurt me. Why?” Stockman famously described the meeting as a “trip to the woodshed.” Though the president himself forgave him, Stockman’s loose lips undercut his power at the White House, and in 1985 he left government to become an investment banker at Salomon Brothers.

A few years ago my friend Jon Brooks supplied this great illustration of skewed interpretation at work. Here’s how investors react to events when they’re feeling good about life (which usually means the market has been rising): Strong data: economy strengthening—stocks rally Weak data: Fed likely to ease—stocks rally Data as expected: low volatility—stocks rally Banks make $4 billion: business conditions favorable—stocks rally Banks lose $4 billion: bad news out of the way—stocks rally Oil spikes: growing global economy contributing to demand—stocks rally Oil drops: more purchasing power for the consumer—stocks rally Dollar plunges: great for exporters—stocks rally Dollar strengthens: great for companies that buy from abroad—stocks rally Inflation spikes: will cause assets to appreciate—stocks rally Inflation drops: improves quality of earnings—stocks rally Of course, the same behavior also applies in the opposite direction. When psychology is negative and markets have been falling for a while, everything is capable of being interpreted negatively. Strong economic data is seen as likely to make the Fed withdraw stimulus by raising interest rates, and weak data is taken to mean companies will have trouble meeting earnings forecasts. In other words, it’s not the data or events; it’s the interpretation. And that fluctuates with swings in psychology.

On taxes, he had repudiated his 1980 “voodoo economics” language. It was a large price to pay for political viability, for Bush had been right that tax cuts alone could not lead to long-term fiscal health. Together with a general failure to curb spending in the Reagan years, the supply-side view, with its emphasis on lower taxes, was driving up the federal deficits and debt. Reagan’s successor, whoever he might be, would be forced to reckon with unpaid bills and persistent shortfalls.

Economically, Reagan’s followers—and Reagan himself—had been converted to the theory of “supply-side economics,” which held that tax cuts would stimulate so much economic activity that tax revenues would actually rise if rates were lower.

But when Stigler was put in front of the TV cameras, lights blazing, and asked about supply-side economics, the iconoclastic economist opined that “it’s a gimmick, or, if you wish, a slogan.” Ouch. That didn’t help Ronald Reagan. I presume it didn’t help George Stigler either, who was quickly hustled off stage.

George Mason’s economics department, meanwhile, became a hotbed of controversial theories that began to transform Americans’ tax bills, serving as an incubator for the supply-side tax cuts in the Reagan administration that hugely advantaged the rich.

According to Marxist economist Christian Marazzi, the switch from Fordism to post-Fordism can be given a very specific date: October 6, 1979. It was on that date that the Federal Reserve increased interest rates by 20 points, preparing the way for the ‘supply-side economics’ that would constitute the ‘economic reality’ in which we are now enmeshed.

inflation is often a supply-side phenomenon with multiple causes. Inflation generated by strong aggregate demand beyond full employment is rarely observed, apart from the immediate post-World War II (WWII) period

inflation is often a supply-side phenomenon with multiple causes. Inflation generated by strong aggregate demand beyond full employment is rarely observed, apart from the immediate post-World War II (WWII) period.

I was amazed at how expensive economists thought doctors were. They instituted many economic maneuvers—de-skilling medicine onto nurses and physician assistants; computerizing medical decision-making; substituting algorithms for thinking—because they assumed that doctors were such expensive commodities. And yet doctors were not expensive, at least, not the doctors I knew. We cost no more than the nurses, the middle managers, and the information technicians, alas. Adding up all the time I spent with Mrs. Muller, the cost of her accurate diagnosis was about the same as one MRI scan, wholesale. Economists did the same thing with the other remedies of premodern medicine—good food, quiet surroundings, and the little things—treating them as expensive luxuries and cutting them out of their calculations. At Laguna Honda, for instance, while most patients were on fifteen or even twenty daily medications, many of which they didn’t need, the budget for a patient’s daily meals had been pared down to seven dollars, which could supply only the basics. I began to wonder: Had economists ever applied their standard of evidence-based medicine to their own economic assumptions? Under what conditions, with which patients and which diseases was it cost-effective to trade good food, clean surroundings, and doctor time for medications, tests, and procedures? Especially ones that patients didn’t need? Although Mrs. Muller was an impressive example of Laguna Honda’s Slow Medicine, she wasn’t the only one. Almost every patient I admitted had incorrect or outmoded diagnoses and was taking medications for them, too. Medications that required regular blood tests; caused side effects that necessitated still more medications; and put the patient at risk for adverse reactions. Typically my patients came in taking fifteen to twenty-five medications, of which they ended up needing, usually, only six or seven. And medications, even the cheapest, were expensive. Adding in the cost of side effects, lab tests, adverse reactions, and the time pharmacists, doctors, and nurses needed to prepare, order, and administer them, each medication cost something like six or seven dollars a day. So Laguna Honda’s Slow Medicine, to the extent that it led to discontinuing ten or twelve unnecessary medications, was more efficient than efficient health care by at least seventy dollars per day. I

Suraj solar and allied industries, Wework galaxy, 43, Residency Road, Bangalore-560025. Mobile number : +91 808 850 7979 Introduction to Solar Rooftop in Bangalore Solar rooftop systems have emerged as a game-changing innovation in Bangalore's energy consumption, providing a green and sustainable alternative to conventional sources of power. Solar rooftops are gaining a lot of traction among residential, commercial, and industrial users in the city as it deals with rising energy demands and environmental concerns. This article examines the advantages, drawbacks, government initiatives, case studies, and prospects for the future of solar rooftops, which have had a profound effect on Bangalore's energy landscape. 1. Introduction to Bangalore's Solar Rooftops An Overview of Bangalore's Solar Rooftop Systems Ah, Bangalore! Home to tech whiz kids, filter coffee connoisseurs, and now the progressive pioneers who are embracing solar rooftops! The eco-friendly Batman of the energy industry, solar rooftop systems are perched atop buildings and convert sunlight into clean, renewable power. Installed on rooftops, these systems use solar panels to generate electricity, assisting in the reduction of reliance on conventional grid power. 2. Economic Benefits of Solar Rooftops for Energy Consumption Who doesn't love saving money while protecting the environment? The economic benefits of solar rooftops in Bangalore are significant. By producing your own power, you can slice those heavy energy bills and even bring in an additional money by selling overabundance influence back to the matrix. It's like having a solar side business on your roof! Impact on the Environment Let's be honest: Bangalore's air quality could use a break. When it comes to reducing emissions of greenhouse gases and air pollution, solar rooftops emerge as the cloaked crusaders. You are reducing your carbon footprint and contributing to a cleaner and greener Bangalore by using solar power. When the sun shines on your rooftop panels, it's like giving Mother Nature a high five. 3. Impact of Solar Rooftop in Bangalore Energy Landscape Reduction of Carbon Footprint Bangalore, with its vibrant culture and bustling IT hubs, can also be a hotbed for emissions. Sun powered roofs go about as the eco-heroes, checking carbon impressions and advancing manageability. The city has the potential to make a significant leap toward a more healthy environment and a brighter future for future generations by utilizing solar energy. Integration with Existing Energy Infrastructure The beauty of solar rooftops in Bangalore is that they seamlessly combine solar power with traditional grid energy. These frameworks can undoubtedly incorporate with the current energy foundation, making a more strong and dependable energy organization. It's like combining the best of both worlds to guarantee the city's bustling energy supply's stability and sustainability. 4. Adopting Solar Rooftops: Obstacles and Solutions Initial Cost and Return on Investment We understand that the initial cost of installing solar rooftops may appear to be the bad guy in this sustainability tale. However, rest assured! The return on investment for solar rooftops in Bangalore is brighter than a sunny day thanks to government subsidies, tax incentives, and lower panel prices. Consider it a long-term investment in the environment and your savings. Technical Considerations and Maintenance Although the process of maintaining solar rooftops may appear intimidating, it is not rocket science—rather, it is solar science! To keep your solar panels in top condition, all you need to do is clean them on a regular basis, keep an eye on how well the system is working, and do occasional maintenance checks. Navigating the technical aspects of solar rooftops has never been easier thanks to technological advancements and the assistance of local experts.

Larry Kudlow hosted a business talk show on CNBC and is a widely published pundit, but he got his start as an economist in the Reagan administration and later worked with Art Laffer, the economist whose theories were the cornerstone of Ronald Reagan’s economic policies. Kudlow’s one Big Idea is supply-side economics. When President George W. Bush followed the supply-side prescription by enacting substantial tax cuts, Kudlow was certain an economic boom of equal magnitude would follow. He dubbed it “the Bush boom.” Reality fell short: growth and job creation were positive but somewhat disappointing relative to the long-term average and particularly in comparison to that of the Clinton era, which began with a substantial tax hike. But Kudlow stuck to his guns and insisted, year after year, that the “Bush boom” was happening as forecast, even if commentators hadn’t noticed. He called it “the biggest story never told.” In December 2007, months after the first rumblings of the financial crisis had been felt, the economy looked shaky, and many observers worried a recession was coming, or had even arrived, Kudlow was optimistic. “There is no recession,” he wrote. “In fact, we are about to enter the seventh consecutive year of the Bush boom.”19 The National Bureau of Economic Research later designated December 2007 as the official start of the Great Recession of 2007–9. As the months passed, the economy weakened and worries grew, but Kudlow did not budge. There is no recession and there will be no recession, he insisted. When the White House said the same in April 2008, Kudlow wrote, “President George W. Bush may turn out to be the top economic forecaster in the country.”20 Through the spring and into summer, the economy worsened but Kudlow denied it. “We are in a mental recession, not an actual recession,”21 he wrote, a theme he kept repeating until September 15, when Lehman Brothers filed for bankruptcy, Wall Street was thrown into chaos, the global financial system froze, and people the world over felt like passengers in a plunging jet, eyes wide, fingers digging into armrests. How could Kudlow be so consistently wrong? Like all of us, hedgehog forecasters first see things from the tip-of-your-nose perspective. That’s natural enough. But the hedgehog also “knows one big thing,” the Big Idea he uses over and over when trying to figure out what will happen next. Think of that Big Idea like a pair of glasses that the hedgehog never takes off. The hedgehog sees everything through those glasses. And they aren’t ordinary glasses. They’re green-tinted glasses—like the glasses that visitors to the Emerald City were required to wear in L. Frank Baum’s The Wonderful Wizard of Oz. Now, wearing green-tinted glasses may sometimes be helpful, in that they accentuate something real that might otherwise be overlooked. Maybe there is just a trace of green in a tablecloth that a naked eye might miss, or a subtle shade of green in running water. But far more often, green-tinted glasses distort reality. Everywhere you look, you see green, whether it’s there or not. And very often, it’s not. The Emerald City wasn’t even emerald in the fable. People only thought it was because they were forced to wear green-tinted glasses! So the hedgehog’s one Big Idea doesn’t improve his foresight. It distorts it. And more information doesn’t help because it’s all seen through the same tinted glasses. It may increase the hedgehog’s confidence, but not his accuracy. That’s a bad combination.

Traditional economics assumes that prices of products in the market are determined by a balance between two forces: production at each price (supply) and the desires of those with purchasing power at each price (demand). The price at which these two forces meet determines the prices in the marketplace. This is an elegant idea, but it depends cetnrally on the assumption that the two forces are independent and that together they produce the market price. The results of all the experiments presented in this chapter (and the basic idea of arbitrary coherence itself) challenge these assumptions. First, according to the standard economic framework, consumers' willingness to pay is one of the two inputs that determine market prices (this is the demand). But as our experiments demonstrate, what consumers are willing to pay can easily be manipulated, and this means that consumers don't in fact have a good handle on their own preferences and the prices they are willing to pay for different goods and experiences. Second, whereas the standard economic framework assumes that the forces of supply and demand are independent, the type of anchoring manipulations we have shown here suggest that they are, in fact, dependent. In the real world, anchoring comes from manufacturer's suggested retail prices (MSRPs), advertised prices, promotions, product introductions, etc.-all of which are supply-side variables. It seems then that instead of consumers' willingness to pay influencing market prices, the causality is somewhat reversed and it is market prices themselves that influence consumers' willingness to pay. What this means is that demand is not, in fact, a completely separate force from supply.

In a parody of the supply-side economics of creative destruction, advocates of AB 32 envisaged “alternative” energy sources creating new jobs and industries and replacing existing fuels. Thomas Friedman’s Hot, Flat, and Crowded3 is the bible of this delusional sect, which has captured much of Silicon Valley. This economic model sees new wealth emerge from dismantling the existing energy economy and replacing it with a medieval system of windmills and druidical sun temples. But the destruction of the workable and efficient energy system we have does nothing to enable a new one.

demand and supply are merely two sides of the same coin. They are the same thing looked at from different directions. Supply creates demand because at bottom it is demand. The supply of the thing they make is all that people have, in fact, to offer in exchange for the things they want.

Think about it this way. It has now been more than thirty years since the supply-side revolution conquered Washington, since laissez-faire became the dogma of the nation’s ruling class, shared by large numbers of Democrats as well as Republicans. We have lived through decades of deregulation, deunionization, privatization, and free-trade agreements; the neoliberal ideal has been projected into every corner of the nation’s life. Universities try to put themselves on a market-based footing these days; so do hospitals, electric utilities, churches, and museums; so does the Post Office, the CIA, and the U.S. Army. And now, after all this has been going on for decades, we have a people’s uprising demanding that we bow down before the altar of the free market. And this only a short while after the high priests of that very cosmology led the world into the greatest economic catastrophe in memory. “Amazing” is right. “Unlikely” would also be right. “Preposterous” would be even righter.

Between those who sold the Republican majority on a massive tax cut in 1981 and the professional critics of Keynesianism there were deep rifts and rivalries. A striking number of the leading organizers of the "supply-side" movement were economic innocents: Robert Bartley, who assumed direction of the editorial page of the Wall Street Journal in 1972 with ambitions to make it (as he did) the most sharply conservative editorial page in mainstream journalism; Jude Wanniski, the flamboyant journalist who was Bartley's first associate editor; George Gilder, the self-taught sociobiologist; Jack Kemp, the maverick congressman eager to put a populist face on the Republican party; and Irving Kristol, dean of neoconservative journalism and matchmaker to the new conservative foundations. Robert Lucas dismissed the linchpin of supply-side economics-the Kemp-Roth bill calling for a 30 percent across-the-board cut in federal individual income tax rates-as a "crackpot proposal.

Systems of supremacy and domination ultimately imperil even those who, in many crucial respects, benefit from them. Racism, while it elevates whiteness, is weaponized to erode the welfare and wages that would enable white people to lead healthier, less precarious lives. Misogyny hurts men economically and emotionally, as gendered pay gaps suppress overall wages and through the trap of destructive and often violent standards of masculinity. Transphobia impacts everyone by imposing state-sponsored gender norms and curtailing freedom and self-expression. Ableism, by devaluing and dehumanizing the disabled, dissuades people from demanding the social services and public assistance they need as they cope with illness or aging. The inequality and pursuit of endless growth that drive climate change endanger the homes, infrastructure, and supply chains on which the wealthy and working class both rely—not to mention the complex ecosystems in which we are all embedded. Solidarity, in other words, is not selfless. Siding with others is the only way to rescue ourselves from the catastrophes that will otherwise engulf us.

Into this situation, came the Reagan Administration’s bizarre collection of “free market” economic conundrums, called by their advocates, “Supply-Side” economics. The idea was thin cover for unleashing some of the highest rates of short-term personal profiteering in history, at the expense of the greater good of the country’s long-term economic health. While policies imposed after October 1982 to collect billions from Third World countries, brought a huge windfall of financial liquidity to the American banking system, the ideology of Wall Street, and Treasury Secretary Donald Regan‘s zeal for lifting the government “shackles” off financial markets, resulted in the greatest extravaganza in world financial history. When the dust settled by the end of that decade, some began to realize that Reagan’s “free market” had destroyed an entire national economy. It happened to be the world’s largest economy, and the base of world monetary stability as well. On the simple-minded and quite mistaken argument that a mere removing of the tax burden on the individual or company would allow them to release “stifled creative energies” and other entrepreneurial talents, President Ronald Reagan signed the largest tax reduction bill in postwar history in August 1981. The bill contained provisions which also gave generous tax relief for certain speculative forms of real estate investment, especially commercial real estate. Government restrictions on corporate takeovers were also removed, and Washington gave the clear signal that “anything goes,” so long as it stimulated the Dow Jones Industrials stock index.

While the rich became richer, the taxation policy of the government, instead of correcting this trend, actively strengthened it. One of the first decisions of the first Modi government was to abolish the wealth tax that had been introduced in 1957. While the fiscal resources generated by this tax were never significant, the decision was more than a symbolic one.126 The wealth tax was replaced with an income tax increase of 2 percent for households that earned more than Rs 10 million (133,333 USD) annually.127 Few people pay income tax in India anyway: only 14.6 million people (2 percent of the population) did in 2019. As a result, the income-tax-to-GDP ratio remained below 11 percent. Not only has the Modi government not tried to introduce any reforms to change this, but it has instead increased indirect taxes (such as excise taxes), which are the most unfair as they affect everyone, irrespective of income. Taxes on alcohol and petroleum products are a case in point. As some state governments have also imposed their own taxes, this strategy means that India has one of the highest taxation rates on fuel in the world. The share of indirect taxes in the state’s fiscal resources has increased under the Modi government to reach 50 percent of the total taxes—compared to 39 percent under UPA I and 44 percent under UPA II.128 Modi’s taxation policy, a supply-side economics approach, is in keeping with the managerial rhetoric of promoting the spirit of enterprise that the prime minister, who readily presents himself as an efficiency-conscious “apolitical CEO,” relishes. One of the neoliberal measures the Modi government enacted in the name of economic rationality, right from his very first budget in 2015, was to lower the corporate tax.129 For existing companies it was reduced from 30 to 22 percent, and for manufacturing firms incorporated after October 1, 2019 that started operations before March 31, 2023, it was reduced from 25 to 15 percent—the biggest reduction in twenty-eight years. In addition to these tax reductions, the government withdrew the enhanced surcharge on long- and short-term capital gains for foreign portfolio investors as well as domestic portfolio investors.130

also trying to act in good faith and also becoming useful idiots for big business and the rich. Another of them was Martin Feldstein, the conservative Harvard superstar who became the new president’s chief economic adviser—but only nominally, because Reagan ignored him. Feldstein actually hated deficits, as true conservatives did, and called his supply-side colleagues “extremists.” Stockman’s chief economist at the Office of Management and Budget—who left in 1983 to earn a fortune on Wall Street, then become a cocaine addict and TV pundit—said that Feldstein “has failed at making the transition from academic economist to political economist.” That was thirty-six-year-old Larry Kudlow, defining political economist to mean not an expert on political economics but an economist willing and eager to dissemble and lie to suit his political masters, thirty-five years before he returned to government work as Trump’s director of the National Economic Council.

I remind people that financial IQ is made up of knowledge from four broad areas of expertise: 1.​Accounting Accounting is financial literacy or the ability to read numbers. This is a vital skill if you want to build an empire. The more money you are responsible for, the more accuracy is required, or the house comes tumbling down. This is the left-brain side, or the details. Financial literacy is the ability to read and understand financial statements which allows you to identify the strengths and weaknesses of any business. 2.​Investing Investing is the science of “money making money.” This involves strategies and formulas that use the creative right-brain side. 3.​Understanding markets Understanding markets is the science of supply and demand. You need to know the technical aspects of the market, which are emotion-driven, in addition to the fundamental or economic aspects of an investment. Does an investment make sense or does it not make sense based on current market conditions? 4.​The law A corporation wrapped around the technical skills of accounting, investing, and markets can contribute to explosive growth. A person who understands the tax advantages and protections provided by a corporation can get rich so much faster than someone who is an employee or a small-business sole proprietor. It’s like the difference between someone walking and someone flying. The difference is profound when it comes to long-term wealth.

Easy money, wrote Hazlitt, creates economic distortions … it tends to encourage highly speculative ventures that cannot continue except under the artificial conditions that have given birth to them. On the supply side, the artificial reduction of interest rates discourages normal thrift, saving, and investment. It reduces the accumulation of capital. It slows down that increase in productivity, that ‘economic growth’ that ‘progressives’ profess to be so eager to promote.

Briefly, the book’s central arguments are these: 1. Rapid productivity growth in the modern economy has led to cost trends that divide its output into two sectors, which I call “the stagnant sector” and “the progressive sector.” In this book, productivity growth is defined as a labor-saving change in a production process so that the output supplied by an hour of labor increases, presumably significantly (Chapter 2). 2. Over time, the goods and services supplied by the stagnant sector will grow increasingly unaffordable relative to those supplied by the progressive sector. The rapidly increasing cost of a hospital stay and rising college tuition fees are prime examples of persistently rising costs in two key stagnant-sector services, health care and education (Chapters 2 and 3). 3. Despite their ever increasing costs, stagnant-sector services will never become unaffordable to society. This is because the economy’s constantly growing productivity simultaneously increases the community’s overall purchasing power and makes for ever improving overall living standards (Chapter 4). 4. The other side of the coin is the increasing affordability and the declining relative costs of the products of the progressive sector, including some products we may wish were less affordable and therefore less prevalent, such as weapons of all kinds, automobiles, and other mass-manufactured products that contribute to environmental pollution (Chapter 5). 5. The declining affordability of stagnant-sector products makes them politically contentious and a source of disquiet for average citizens. But paradoxically, it is the developments in the progressive sector that pose the greater threat to the general welfare by stimulating such threatening problems as terrorism and climate change. This book will argue that some of the gravest threats to humanity’s future stem from the falling costs of these products, rather than from the rising costs of services like health care and education (Chapter 5). The central purpose of this book is to explain why the costs of some labor-intensive services—notably health care and education—increase at persistently above-average rates. As long as productivity continues to increase, these cost increases will persist. But even more important, as the economist Joan Robinson rightly pointed out so many years ago, as productivity grows, so too will our ability to pay for all of these ever more expensive services.

This distributed efficiency of the market is indeed extraordinary, and attempting to run an economy without it typically leads to short supplies and long queues. It was out of recognition of this power that the neoliberal scriptwriters put the market centre stage in their economic play. There is, however, a flip side to the market’s power: it only values what is priced and only delivers to those who can pay. Like fire, it is extremely efficient at what it does, but dangerous if it gets out of control. When the market is unconstrained, it degrades the living world by over-stressing Earth’s sources and sinks. It also fails to deliver essential public goods—from education and vaccines to roads and railways—on which its own success deeply depends.

In making investments, it has become my habit to worry less about the economic future—which I’m sure I can’t know much about—than I do about the supply/demand picture relating to capital. Being positioned to make investments in an uncrowded arena conveys vast advantages. Participating in a field that everyone’s throwing money at is a formula for disaster.

Mazzucato observes that public funding drove both the IT revolution and other fields such as bio- and nano-technologies and today’s green technologies.50 Each of these has involved both supply-side and demandside policies, in which new markets as well as new products have been created and public investment has ‘crowded in’ private. By setting societal missions, and using their own resources to co-invest with long-term capital, governments can do far more than ‘level the playing field’, as the orthodox view would allow. They can help tilt the playing field towards the achievement of publicly chosen goals. Just as the creation of the welfare state in the postwar period, and the information technology revolution in the decades around the turn of the century, unleashed new waves of economic growth and widened prosperity, so new missions today have the potential to catalyse new innovation and investment.

The economic theory propounded by John Maynard Keynes in the 1930s dwelled heavily on the role of governments vis-à-vis cycles. Keynesian economics focuses on the role of aggregate demand in determining the level of GDP, in contrast with earlier approaches that emphasized the role of the supply of goods. Keynes said governments should manage the economic cycle by influencing demand. This, in turn, could be accomplished through the use of fiscal tools, including deficits. Keynes urged governments to aid a weak economy by stimulating demand by running deficits. When a government’s outgo—its spending—exceeds its income—primarily from taxes—on balance it puts funds into the economy. This encourages buying and investing. Deficits are stimulative, and thus Keynes considered them helpful in dealing with a weak economy. On the other hand, when economies are strong, Keynes said governments should run surpluses, spending less than they take in. This removes funds from the economy, discouraging spending and investment. Surpluses are contractionary and thus an appropriate response to booms. However, the use of surpluses to cool a thriving economy is little seen these days. No one wants to be a wet blanket when the party is going strong. And spending less than you bring in attracts fewer votes than do generous spending programs. Thus surpluses have become as rare as buggy whips.

Since inflation results from economic strength, the efforts of central bankers to control it amount to trying to take some of the steam out of the economy. They can include reducing the money supply, raising interest rates and selling securities. When the private sector purchases securities from the central bank, money is taken out of circulation; this tends to reduce the demand for goods and thus discourages inflation. Central bankers who are strongly dedicated to keeping inflation under control are called “hawks.” They tend to do the things listed above sooner and to a greater extent. The problem, of course, is that actions of this kind are anti-stimulative. They can accomplish the goal of keeping inflation under control, but they also restrain the growth of the economy, with effects that can be less than beneficial. The issue is complicated by the fact that in the last few decades, many central banks have been given a second responsibility. In addition to controlling inflation, they are expected to support employment, and, of course, employment does better when the economy is stronger. So central banks encourage this through stimulative actions such as increasing the money supply, decreasing interest rates, and injecting liquidity into the economy by buying securities—as in the recent program of “quantitative easing.” Central bankers who focus strongly on encouraging employment and lean toward these actions are called “doves.

Adam Smith’s great insight was to show that the marketplace can mobilise diffuse information about people’s wants and the cost of meeting them, thereby coordinating billions of buyers and sellers through a global system of prices – all without the need for a centralised grand plan. This distributed efficiency of the market is indeed extraordinary, and attempting to run an economy without it typically leads to short supplies and long queues. It was out of recognition of this power that the neoliberal scriptwriters put the market centre stage in their economic play. There is, however, a flip side to the market’s power: it only values what is priced and only delivers to those who can pay. Like fire, it is extremely efficient at what it does, but dangerous if it gets out of control. When the market is unconstrained, it degrades the living world by over-stressing Earth’s sources and sinks. It also fails to deliver essential public goods – from education and vaccines to roads and railways – on which its own success deeply depends.

The economy is growing, and the economic reports are positive. Corporate earnings are rising and beating expectations. The media carry only good news. Securities markets strengthen. Investors grow increasingly confident and optimistic. Risk is perceived as being scarce and benign. Investors think of risk-bearing as a sure route to profit. Greed motivates behavior. Demand for investment opportunities exceeds supply. Asset prices rise beyond intrinsic value. Capital markets are wide open, making it easy to raise money or roll over debt. Defaults are few. Skepticism is low and faith is high, meaning risky deals can be done. No one can imagine things going wrong. No favorable development seems improbable. Everyone assumes things will get better forever. Investors ignore the possibility of loss and worry only about missing opportunities, No one can think of a reason to sell, and no one is forced to sell. Buyers outnumber sellers. Investors would be happy to buy if the market dips. Prices reach new highs. Media celebrate this exciting event. Investors become euphoric and carefree. Security holders marvel at their own intelligence; perhaps they buy more. Those who’ve remained on the sidelines feel remorse; thus they capitulate and buy. Prospective returns are low (or negative). Risk is high. Investors should forget about missing opportunity and worry only about losing money. This is the time for caution!

Of course, “conventional wisdom” at the time held that there could never be a pickup in demand for homes. Instead, most people were convinced that the American dream of home ownership was over; demand for homes would remain depressed forever; and thus the overhang of unsold homes would be absorbed only very slowly. They cited the trend among young people — having been burnt by the collapse of the housing and mortgage bubbles — to rent rather than buy, and as usual they extrapolated it rather than question its durability. As in so many of the examples in this book, for most people, psychology-driven extrapolation took the place of an understanding of and belief in cyclicality. It was clear to me and my Oaktree colleagues, from the graph and from our knowledge of the data behind it, that because the greatest economic crash in almost eighty years had halted additions to the housing supply, home prices could recover strongly if there was any material increase in demand. And, rejecting conventional wisdom, we were convinced that housing demand would prove cyclical as usual, and thus would pick up sometime in the intermediate-term future. This conclusion — supported by other data and analysis — contributed to our decision to invest heavily in non-performing home mortgages and non-performing bank loans secured by land for residential construction, and to purchase North America’s largest private homebuilding company. These investments worked out quite well. (It’s interesting in this context to note what the Wall Street Journal said in a May 12, 2017 article headlined “Generation of Renters Now Buying”: “In all [first-time home buyers] have accounted for 42% of buyers this year, up from 38% in 2015 and 31% at the lowest point during the recent housing cycle in 2011.” So much for extrapolating widespread abandonment of home ownership.)

a tendency towards producer dominance. In at least two of the cases, the lack of competence on the user side was reinforcing the unsatisfactory trajectory of innovations. This pattern might inspire a technology policy that is more oriented towards strengthening the competence of users than the supply-oriented technology policy dominating today. An extension of such a new orientation that encompasses the ‘final users’, workers and consumers might have radical implications.

It is no coincidence that the new phase of American debt imperialism has also been accompanied by the rise of the evangelical right, who—in defiance of almost all previously existing Christian theology—have enthusiastically embraced the doctrine of “supply-side economics,” that creating money and effectively giving it to the rich is the most Biblically appropriate way to bring about national prosperity.

Andrew Mellon served as an officer or director for more than 160 corporations. In 1913, he and his brother established the Mellon Institute of Industrial Research, which later merged with the Carnegie Institute of Technology to become Carnegie Mellon University. During the First World War, he served on the board of the American Red Cross and other organizations supporting America’s wartime efforts. In 1921, President Warren G. Harding appointed Andrew Mellon to secretary of the treasury, and he continued as such under both Calvin Coolidge and Herbert Hoover. As secretary, Mellon was a pioneer of supply-side economics, cutting tax rates in order to spur investment and

As secretary, Mellon was a pioneer of supply-side economics, cutting tax rates in order to spur investment and economic

What we don’t need is central economic planning or new laws, more taxes or fewer good-paying jobs. What we need is something much more difficult to get than a Porsche—character. We need the sort of character that is able to look at the world and all it has to offer and at certain key moments say simply, “Thank you, but I’m now satisfied.” It takes a huge amount of moral stamina to be able to say, “Yes, we could afford it, but we are not going to buy it, because it does little to contribute to the basic goodness of our lives.” We need to switch our economic thinking from the supply side to the desire side of the equation.